A new Canadian tax plan may put the brakes on the growth of income trusts, and has already caused a re-sizing of energy trusts' market capitalizations by 15% or more. Jim Flaherty, Canada's minister of finance, says, the measures "are necessary to restore balance and fairness to Canada's tax system, to ensure our economy continues to grow and prosper and to bring Canada in line with other jurisdictions...Our actions are clear, decisive and in the best interest of all Canadians." Flaherty says many companies in Canada have announced their intentions to convert to income trusts as a "corporate tax avoidance" tactic. There were almost C$70 billion in new trust announcements this year alone, he adds. According to Citigroup analyst Richard Roy, as of June, 237 income trusts were listed on the Toronto Stock Exchange. During the last two years, about 34 companies have converted to the trust structure. Flaherty says, "...If left unchecked, these corporate decisions would result in billions of dollars in less revenue for the federal government to invest in the priorities of Canadians, including more personal income tax relief. These decisions would also mean less revenue for the provinces and territories." For more on this, see the December issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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